As Finance Minister,
Mathias Cormann
is clearly a big winner in the new cabinet. The financial services industry will be sorry to lose him. In opposition, Cormann had quickly established a reputation for mastering the details of a complex portfolio where mis-steps can have immediate, enormous financial impact.

He is hard to miss – either as a salesman or as a critic of opponents.

After the constant reforms of the past few years, the industry was also particularly keen to have the prospect of continuity as well as a prominent champion in the new government.

But the new Assistant Treasurer,
Arthur Sinodinos
, does bring the advantage of high-level political experience as key adviser in the Howard government plus career experience with the financial services industry after stints with both NAB and Goldman Sachs.

The Financial Services Council, for example, welcomed the Sinodinos appointment, saying he had “unparalleled experience" and that the industry looked forward to continuing to work with him.

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Yet Sinodinos’s responsibility for financial services and superannuation isn’t spelled out in his new portfolio.

So what’s in a name?

‘Title deflation’

Tony Abbott
is stressing he wants to introduce “title deflation". He jokes that the Labor government favoured “title inflation" – ministerial roles so long that they could be difficult to fit onto a business card. That means a whole lot of extended ministerial responsibilities are now grouped under one simple name. Like Communications. Or Education. Or Industry. Or Agriculture.

(How delightfully old-school. We can already feel the quivering of those layers and layers of management consultants and political consultants. Unfortunately, it also true that having only one woman in cabinet is a far less appealing old-fashioned look and reinforces the criticism of Abbott from the usual quarters.)

Chris Bowen
, acting Labor leader, immediately criticised Abbott’s willingness to ignore “whole swathes of the economy" as well as the failure to promote more women into cabinet.

He said that not having a specific minister for financial services – or one for areas like skills or tourism or resources or disability or the aged – meant these sectors no longer had anyone with a clear and specific voice, able to advance their interests.

As a former Financial Services minister himself, Bowen certainly understands the significance and sensitivity of the industry. Abbott’s argument is that just because a particular role is not specified in a ministerial title it will not be any less of a focus for a minister.

That may turn out to be true. The key is, as always, the ability to get the support of a smart, well-connected and effective minister no matter the details of the title. But this also only works if a minister can devote the mental energy to be across each area of the portfolio. Sinodinos will certainly be busy.

Abbott’s message is that his ministers’ role will be to implement the Coalition’s election commitments “purposefully, methodically and calmly" and to “respond intelligently" to unexpected developments.

Expect the unexpected

There will be inevitably be much of the unexpected in every portfolio – especially the prospect of economic shocks confronting Treasurer
Joe Hockey
’s plan for a slow and steady road back to a budget surplus.

But what is clear is that there is also a lot to do in financial services – including the high probability of dealing with unpleasant surprises over the term of this government.

The latest consultation paper on self managed super funds from the Australia Securities and Investment Commission on Monday was another loud warning about the increasing risks in this fast growing area.

According to the latest statistics from the Australian Tax Office, about $500 billion – close to one third of Australia’s superannuation total – is now invested via self managed super funds. Many people value the sense of control. In other cases, they are following the suggestion of financial advisers – who often benefit from providing some of the additional work associated with such funds.

Even with the gradual winding-down of commission payments on super products, there’s an obvious potential for conflicts of interest.

ASIC pointed out that a recent review had found the quality of financial advice given to these investors – especially about the risks and costs of setting them up – was not of a sufficiently high standard.

This is even more of a problem given that in cases of theft or fraud, investors in self managed funds don’t have access to the same compensation as other investors in larger funds regulated by APRA.

Spruikers on the prowl

And now that it’s possible for self managed funds to borrow to invest in shares or property via super funds, the risk of more personal financial disasters is obvious. Property spruikers are on the prowl everywhere again. It’s not hard to imagine the impact of property prices falling or interest rates rising.

ASIC insists advisers must explain these risks to clients, including the time, cost and skills required to run a fund, the duties of trustees and the need for a proper investment strategy.

It also quotes advice from Rice Warner on the minimum cost-effective balance to set up a self managed super fund. According to Rice Warner, that means assets of at least $500,000 for funds requiring full administrative services. And that assumes everything goes well. Nearly half of the funds didn’t have this value in the 2010-2011 financial year. Although the sharemarket has gone up since, the number of small self managed super funds setting up has also accelerated. Sinodinos may yet get to count the political cost of that.